The lithium price had been averaging around $10,000 per tonne from 2016 to 2021, floating primarily between $6,000 and $16,000. As electric vehicles started to gain significant traction in late 2021, the lithium carbonate price shot from $6,000 per tonne to a high around $70,000 per tonne by the start of 2023, more than a 10-fold increase!
The lithium price spike was driven by a combination of surging demand, constrained supply, and market dynamics, particularly in the electric vehicle (EV) sector. Here’s a breakdown of the key causes:
- Surging EV Demand: Global EV sales doubled from 3.3 million units in 2020 to 6.6 million in 2021 and added another 55% to 10.5 million in 2022. This rapid rise, especially in China (the world’s largest EV market), significantly increased demand for lithium-ion batteries, which require substantial amounts of lithium (about 9kg per EV battery). The push for electrification, driven by government policies and consumer preferences, outpaced supply growth.
- Limited Supply Growth: Lithium supply couldn’t keep up with demand due to the time-intensive nature of bringing new mines online, often taking 5 or more years. In 2022, global lithium production was still catching up from earlier underinvestment, leading to a supply deficit.
- Supply Chain Constraints: Pandemic-related disruptions, including labor shortages in Australia (a major lithium producer) and plant maintenance issues in China, tightened supply further. Geopolitical tensions and China’s dominance in lithium processing (handling most of the world’s lithium) added to supply chain vulnerabilities.
- Speculative Market Dynamics: High demand and tight supply led to speculative fervor, with lithium prices soaring as miners and buyers rushed to secure contracts. For example, lithium carbonate prices in China hit a record high of nearly 600,000 CNY per ton in November 2022, up from 87,000 CNY in July 2021—a 590% increase. Auctions by major producers like Ganfeng Lithium and Albemarle pushed prices higher.
- Policy and Investment Frenzy: Government incentives, like the U.S. Inflation Reduction Act of 2022, boosted EV adoption and lithium demand. High prices also made previously unviable mining projects profitable, spurring investment but not immediately increasing supply due to long lead times.
However, the spike was short-lived, as oversupply and slowing EV demand in 2023 led to a sharp price decline, illustrating the market’s volatility. Just as rapidly as the price had done a 10x, it then proceeded to drop by 90% from January of 2023 until today. This was quite the roller-coaster ride for investors trying to profit from the price trends.
Just as prices in volatile markets tend to overshoot to the upside, they also tend to overshoot to the downside. In the case of lithium prices, they have fallen back to pre-mania levels in-line with the longer-term average. This is too steep of a drop in my opinion, given that demand for lithium batteries has continued to rise strongly.
Lithium Supply and Demand Fundamentals
Global lithium-ion battery demand grew from 700 GWh in 2022 to an estimated 1,000 GWh in 2024, with EVs accounting for the majority. Beyond EVs, lithium-ion batteries saw increased use in:
- Energy Storage Systems (ESS): Demand for grid-scale and residential storage grew with renewable energy integration. ESS applications are projected to increase significantly by 2030.
- Consumer Electronics: Smartphones, laptops, and wearables continued to drive demand, with global mobile internet users expected to reach 5 billion by 2025.
- Emerging Sectors: E-bikes, drones, medical devices, and industrial equipment expanded lithium-ion battery applications.
Innovations like solid-state batteries, silicon anodes, and AI-driven battery management improved energy density, safety, and charging speeds. For example, solid-state batteries promise faster charging and higher safety. Mass production is expected to begin over the next few years, which is likely to increase overall adoption of EVs and other devices that use lithium batteries.
In 2025, the market is estimated at $74 billion and expected to hit $145 billion by 2030 (CAGR of 14.5%). Global lithium-ion battery demand is forecast to increase from 700 GWh in 2022 to 4,700 GWh by 2030, a quadrupling driven primarily by EVs (4,300 GWh). Lithium demand for EV batteries alone is expected to exceed current production by up to 8 times by 2040, with deficits projected as early as late 2025.
Last year the EV market share rose to over 20% of global new car sales, with 17 million units sold, a significant jump from 2022’s 14%. This share is expected to increase again this year to over 25% of global car sales. In China, EVs reached nearly 50% of new car sales, with 10 million units sold. So while new production that has come online in the past few years can partially explain lower lithium prices, it is my view that the price per tonne should not have dropped back to 2022 levels when demand was dramatically lower.
I expect lithium prices bottom over the next 6 to 12 months and then start to trend higher once again. The rise is not likely to be as dramatic was it was from late 2021 to early 2023, but I would not be surprised to see the lithium price double or triple over the next few years.
Profiting from Lithium Mining Stocks
Mining stocks typically offer leveraged gains and losses to the move of the underlying metals they mine. The prices they can get for the metals rises faster than their costs, leading to expanding profit margins and much higher valuations. Mining stock prices will often increase by 2 to 3 times as much as prices for the underlying metals.
The Global X Lithium & Battery Tech ETF (LIT) mirrored the moves of the lithium price, but offered more modest moves in both directions. During the 2o months that the lithium price climbed roughly 10x, investors in LIT would have realized a gain of 450%. And during the subsequent 90% drop in the lithium price, that same ETF lost 67% of its value.
This ETF seeks to track the performance of the Solactive Global Lithium Index and is composed of 44 different companies, many listed in China, and others that are not pure lithium plays. It has underperformed most of the individual junior and mid-cap lithium miners that I track. So, while it provides diversified exposure and might be a good fit for some investors, at Nicoya Research we prefer to research individual mining companies and highlight those that we believe have the best upside potential for our subscribers.
My Top Lithium Stock Pick
In the lithium mining sector, my top pick is Patriot Battery Metals (PMETF).
Patriot’s Northern Quebec Project has the largest lithium pegmatite resource, by grade and tonnage, in the Americas. Patriot’s main asset is its Shaakichiuwaanaan Property, previously known as the Corvette Property. The abundance of large spodumene crystals allows for a simple process flowsheet and high recoveries. The company is progressing rapidly with its drilling and feasibility study (expected in September). Production could start in late 2028, but will most likely occur at some point in 2029.
They have a resource estimate of 108.0 Mt at 1.40% Li2O Indicated and 33.3 Mt at 1.33% Li2O Inferred for a total of 4.84 Mt contained LCE (lithium carbonate equivalent). The bubble chart below illustrates just how large and how high grade the project is relative to other lithium deposits in the Americas.
VW and PowerCo paid C$69 million for a 9.9% stake in Patriot in December of 2024, which I think will prove to be prescient timing. Albemarle (NYSE:ALB) also sees the potential in the company, having bought a 5% stake in 2023.
The company recently reported the discovery of a large cesium zone on the property. Caesium is a critical and strategic mineral and there are very few cesium mines currently operating in the world. Patriot’s mineral resource update due later this year will include the recently-discovered cesium.
But it does not stop there. Tantalum and gallium are two other critical and strategic metals found within Shaakichiuwaanaan. In fact, Patriot’s property ranks as a top 5 tantalum pegmatite mineral resource in the world. These byproducts will serve to make the economics of the project even more attractive. Patriot has detailed a phased approach that could see the installation of a 2.5 Mtpa processing plant in Stage 1 and another 2.5 Mpta processing plant to run in parallel in Stage 2.
Risks
Current lithium pricing is not high enough to incentivize the new required production. Supply cuts are happening with current producing mines going into care and maintenance or projects being delayed. I could be early in calling a bottoming of lithium prices and Patriot’s share price.
But markets are forward-looking, typically pricing in expectations for developments over the next 12 to 18 months. So the share price for Patriot Battery Metals can start to move dramatically higher off oversold conditions, even absent a current catalyst or rising lithium prices. This is what I expect to start happening in the near-term, but I make no claim to being able to precisely time the bottom. My approach is to start dipping my toes into the water via buying in small tranches.
Technical Charts
The long-term chart for Patriot Battery Metals (PMETF) shows that it greatly outperformed the sector during the 2022/2023 move higher. The share price went from $0.20 to highs around $13 per share. This is a move of 26x (2,700%) compared to the 5.5x (450%) move from $LIT. The price then declined back to $1.20, before bouncing to $2.00 over the past few weeks.
Zooming into the chart for PMETF a little more, we can see what I think might be an early bottoming pattern. It is too early to say with a high level of confidence, but this is enough for me to start dipping my toes. Notice this is first flattening of the price in the past few years and one of the few times we have seen a higher low since the decline began. It is also the first time the price has broken upwards through the 100-day exponential moving average (EMA) in over a year and it has done so twice now in the past month. Volume has also been picking up since this bottoming pattern started, increasing the relevance and bullishness of this pattern.
Patriot Battery Metals is trading at a valuation of around $300 million. This is roughly the same valuation the company had in July of 2022, before they had a maiden mineral resource estimate, pre-feasibility study (PFS), preliminary economic assessment (PEA), several new discoveries, successful battery-grade lithium samples, permitting progress, a large high-grade cesium discovery, and strategic investments from VW and Albemarle. I believe long-term investors will be rewarded for purchasing shares of PMETF under $2.00. I have established a starter position for subscribers to our mining stock newsletter, Gold Stock Bull. To get all of our top mining stock picks covering gold, silver, uranium, lithium and more, subscribe here.
